Alabama school districts are bracing for a cut in state aid, as the governor and attorney general clash over the best way for Alabama to quickly get reimbursements from a $20 billion fund set up by the White House and BP to compensate victims of the energy company’s massive oil leak in the Gulf of Mexico.

In August, Alabama Gov. Bob Riley, a Republican, filed an initial $148 million claim with BP to help restore revenue that the state says was lost because of the spill. Tourists who typically visit Alabama’s beaches in droves over the summer stayed away this year, leading to a significant drop in sales tax revenue, the governor’s office contends.

Most of that money—$112 million—would have gone to the state’s Education Trust Fund, Gov. Riley said in a statement.

Complicating matters, the state’s attorney general, Troy King, also a Republican, filed a lawsuit Aug. 12 seeking damages, although he has not specified an amount. The company will not pay on Alabama’s claim because of the pending legal action, said Ray Melick, a spokesman for BP.

Now, Gov. Riley says he has no choice but to cut state aid to school districts by 2 percent.

Alabama Attorney
General Troy King holds
a Sept. 17 news
conference to discuss a
lawsuit he filed against
BP over the Gulf oil spill.

—Phillip Rawls/AP

“One man made a brash, reckless decision to sue BP while the state was still working to recover lost tax revenue from the company,” Gov. Riley said in a statement released Sept. 16, explaining his decision. “He did it without consulting me or local officials on our coast. No other state’s attorney general has sued BP at this time, and King’s lawsuit stopped our ability to recover these tax dollars before the end of this fiscal year.

“BP can’t escape blame either,” the governor said. “As the admitted responsible party, the company should live up to its commitments, even though the lawsuit stands in the way.”

The company had already paid Alabama $77 million to reimburse the state for clean-up efforts and other activities to respond to the oil leak that started after an April 20 explosion on an off-shore oil rig, and Gov. Riley was confident that BP would pay the claim based on conversations with the company’s leaders, said Todd Stacy, a spokesman for the governor. The lawsuit has slowed down that process, he added.

Mr. King said that he took action, because, in his view, BP has not followed through on its promise to provide quick reimbursements to individuals and businesses.

“BP’s promise to put the Gulf back the way they found it rings hollow to the tens of thousands of individuals and businesses who are still waiting for their claims to be paid,” Mr. King said in a statement. “In fact, it is precisely because of BP’s record of not living up to their commitments that I sued them.”

He appealed directly to BP to pay the state’s claim, contrasting his approach to Gov. Riley’s.

“Governor Riley has chosen to negotiate with you from a position of weakness,” Mr. King said in a statement, directed at BP. “The governor seems unable to see beyond the end of the few months left in his term and has approached you as a panhandler begging for crumbs. … I have chosen an approach of strength. If you will not pay Alabama what it owes, a court will force you to do so.”

District Difficulties

School districts in Alabama are also asking BP for reimbursement dollars. For instance, the Baldwin County public school system filed a claim for $4.3 million, to make up for a loss in local sales tax revenue, said Terry Wilhite, a spokesman for the 28,300-student district, located in the Gulf Coast region.

“The BP oil spill essentially wiped out our summer revenue,” Mr. Wilhite said. The district, which has a budget of $268 million, is slated to lose an additional $2 million because of the impending cuts. “We are hit from two sides, the state-funding side, but also the local-funding side,” he said.

It’s unclear what impact the lawsuit will have on the district’s efforts to recoup revenue, he added.

Before the spill, the district had already reduced its budget by more than $65 million and laid off more than 800 employees. And Baldwin County has nearly drained its rainy day fund, which had $20 million in it about a year ago, and is now down to $3 million.

Losing revenue because of the spill “added insult to injury,” Mr. Wilhite said.

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